Shri Rajiv Manibhai Patel, Ahmedabad V. The Asstt. Commissioner of Income Tax, (Intl. Taxn.), Vadodara

ITA 1274/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3078 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 25-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILAM DAS GUPTA
• Keywords: Capital asset; Retrospective amendment
• Section: 143(3); 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER& MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.1274/AHD/2017 (ASSESSMENT YEAR : 2011-12) SHRI RAJIV MANIBHAI PATEL, 17, EVEREST INDUSTRIAL ESTATE, YAMUNA MILL ROAD, PRATAPNAGAR, VADODARA 390 004. VS. ACIT(INTERNATIONAL TAXATION), VADODARA, RACE COURSE CIRCLE, BARODA 390 007. [ PAN NO. ACWPP 2581 R ] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : MS. KINJAL SHAH, A.R. RESPONDENT BY: MS. NILAM DAS GUPTA, SR.D.R. DATE OF HEARING 18.02.2019 DATE OF PRONOUNCEMENT 28.02.2019 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE ASSESSEE IS AGAINS T THE ORDER DATED 29.10.2015PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 13, AHMEDABAD UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT)ARISING OUT OF THE ORDER DATED 26.1 2.2014 PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX (INTL. TAXATIO N), VADODARA FOR THE ASSESSMENT YEAR 2011-12 WITH THE FOLLOWING GROUNDS: 1. COMM. OF INCOME TAX (A)-13, AHMEDABAD (HEREINAF TER REFERRED TO AS THE CITA) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING ITA NO. 1274/AHD/2017 SHRI RAJIV MANIBHAI PATEL VS. ACIT (INTL. TAX.) A.Y. 2011-12 - 2 - ORDER OF AO CONFINING DEDUCTION U/S 54EC TO RS.50 L ACS INSTEAD OF THE SAME CORRECTLY CLAIMED AT RS. 1 CRORE. 2. IT IS SUBMITTED THAT SINCE THE APPELLANT HAS COM PLIED WITH PROVISIONS OF SECTION 54EC AS INTERPRETED BY DIFFER ENT HON. COURTS AND SINCE INVESTMENT IN BONDS IS MADE IN TWO SEPARATE FINANCIAL YEARS BUT WITHIN SIX MONTHS FROM SALE OF PROPERTY, DEDUCTION OF RS.1 CRORE OUGHT TO HAVE BEEN GRANTED U/S 54EC. 2. THE CASE OF THE ASSESSEE, A NON-RESIDENT, FOR TH E PURPOSES OF THE INCOME TAX ACT, 1961 DURING THE ASSESSMENT YEAR UNDER CONS IDERATION. THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 BY ISSUING A NOTICE U /S 148 OF THE ACT DATED 14.03.2014, AFTER RECORDING THE REASONS FOR SUCH R EOPENING. THE ASSESSEE THEREAFTER SUBMITTED THAT HIS ORIGINAL RETURN FOR A .Y. 2011-12 MAY BE CONSIDERED AS DUE COMPLIANCE WITH THE NOTICE U/S 14 8 OF THE ACT. THE HARD COPY OF THE ITR ALONG WITH COMPUTATION OF INCOME WA S SUPPLIED BY THE ASSESSEE WHICH REVEALED THAT THE ASSESSEES TOTAL I NCOME WAS RS.63,37,488/-. THE REASONS FOR REOPENING OF SUCH ASSESSMENT WAS AL SO SUPPLIED TO THE ASSESSEE IN TERMS OF HIS REQUEST MADE TO THE AUTHORITIES WHI CH IN SHORT WAS THAT ON EXAMINING THE ASSESSEES COMPUTATION OF INCOME, IT WAS NOTICED THAT THE ASSESSEE CLAIMED DEDUCTION AMOUNTING TO RS.1 CRORE U/S 54EC OF THE ACT WHEREAS AS PER SECTION 54EC SINCE THE MAXIMUM PERMI SSIBLE AMOUNT OF DEDUCTION IS RS.50 LACS. THUS, THERE WAS AN EXCESS CLAIM OF DEDUCTION U/S 54EC OF THE ACT, MADE BY THE ASSESSEE. 3. THE FACT, BEHIND THIS IS THAT THE ASSESSEE DURIN G THE YEAR UNDER CONSIDERATION SOLD AN ANCESTRAL BUNGLOW NAMELY SWA SHRAYA BEING A CO- ITA NO. 1274/AHD/2017 SHRI RAJIV MANIBHAI PATEL VS. ACIT (INTL. TAX.) A.Y. 2011-12 - 3 - OWNER THEREOF HAVING 1/3 RD SHARE OF THE SAID PROPERTY FOR A CONSIDERATION OF RS.6,60,00,000/- ON 26.10.2010. AS A RESULT WHEREOF RS.2,20,00,000/- BEING 1/3 RD OF THE SHARE WAS RECEIVED BY THE ASSESSEE. SINCE T HE BUNGLOW WAS CONSTRUCTED BY HIS FATHER OF 1981 TAKING THE BENEFI T OF APPROPRIATE INDEXATION, THE LONG TERM CAPITAL GAIN WAS WORKED OUT AT RS.1,7 7,08,765/- IN THE HANDS OF THE ASSESSEE OUT OF WHICH,RS.22,49,455/- WAS CLAIM ED TO HAVE BEEN INVESTED IN THE RESIDENTIAL FLAT ON 03.11.2010 AND SOUGHT THE B ENEFIT OF SECTION 54 OF THE ACT. APART FROM THAT RS. 50 LACS WAS DEPOSITED IN N HAI BONDS ON 30.11.2010 BY THE ASSESSEE AND CLAIMED DEDUCTION U/S 54EC OF T HE ACT. FURTHER AN AMOUNT OF RS.50 LACS WAS ALSO DEPOSITED IN NHAI BONDS ON 1 3.04.2011 UPON WHICH FURTHER BENEFIT U/S 54EC OF THE ACT WAS CLAIMED. IT WAS THE CASE OF THE ASSESSEE THAT THE INVESTMENT MADE IN NHAI BONDS WERE WITHIN SIX MONTHS ON THE SALE OF THE PROPERTY AND THEREFORE THE ASSESSEE WAS ENTITLE D TO GET DEDUCTION OF THE ENTIRE INVESTMENT OF RS.1 CRORE U/S 54EC. THE LEAR NED AO OBSERVED THAT IN TERMS OF THE FINANCIAL ACT, 2014 ALL AMBIGUITY IN R ELATION TO THE INTERPRETATION OF SECTION 54EC HAS BEEN REMOVED WHERE THE MAXIMUM PERMISSIBLE INVESTMENT WAS RESTRICTED TO RS.50 LACS ONLY. THOUG H, THE PROVISION HAS BEEN INSERTED W.E.F. 01.04.2015,IT MERELY MEANS THAT THE RE SHALL BE NO AMBIGUITY AFTER 01.04.2015 FOR ALL PROSPECTIVE SELLERS OF IMM OVABLE PROPERTY. IN THAT VIEW OF THE MATTER, THE LEARNED AO WAS OF THE VIEW THAT THE ASSESSEE HAS MADE AN EXCESS CLAIM OF RS.50 LACS, WHICH WAS NOT PERMISSIB LE TO BE ALLOWED U/S 54EC OF THE ACT. CLAIM FOR EXEMPTION FOR LONG TERM CAPIT AL GAIN ON THE BALANCE AMOUNT OF RS.50 LACS INVESTED IN NHAI BONDS ON 13.0 4.2011 WAS REJECTED AND THE SAME WAS BROUGHT TO TAX. IN APPEAL, THE SAID FI NDING AND THE ADDITION MADE BY THE LEARNED AO WAS CONFIRMED AGAINST WHICH THE I NSTANT APPEAL BEFORE US. ITA NO. 1274/AHD/2017 SHRI RAJIV MANIBHAI PATEL VS. ACIT (INTL. TAX.) A.Y. 2011-12 - 4 - 4. AT THE TIME OF HEARING OF THE INSTANT APPEAL THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT SIMILAR ISSUE RELATING TO THE DISPUTE REGARDING THE CLAIM OF ENTIRE RS. 1 LAC U/S 54EC AS RAISED BY THE ASSESSEE HAS ALREADY BEEN DEALT WITH BY THE CO-ORDI NATE BENCH IN ITA NO.2291/AHD/2015 FOR A.Y. 2011-12 IN FAVOUR OF THE ASSESSEE RELYING UPON THE JUDGMENT PASSED BY THE CO-ORDINATE BENCH IN ITA NO. 3603/AHD/2015. THE LEARNED AO FURTHER SUBMITTED THAT THE LD. TRIBUNAL WAS PLEASED TO HOLD THAT DEDUCTION CLAIM OF RS.50 LACS EACH THOUGH SPREAD OV ER TO TWO FINANCIAL YEARS SINCE FALLING WITHIN 6 MONTHS OF THE CAPITAL ASSET S TRANSFER IN QUESTION IS ALLOWABLE. IT WAS FURTHER OBSERVED THAT THE SECOND PROVISO TO SECTION 54EC(1) OF THE ACT INTRODUCED BY FINANCIAL ACT (ACT NO.2) 2 014 W.E.F 07.04.2015 DOES NOT HAVE RETROSPECTIVE EFFECT AND THEREFORE, NOT AP PLICABLE TO THE CASE OF THE APPELLANT. HE THEREFORE PRAYED FOR THE SAME RELIEF BEFORE US. ON THE CONTRARY, THE LEARNED DR RELIED UPON THE ORDER PASSED BY THE AUTHORITIES BELOW. 5. HEARD THE RESPECTIVE PARTIES, PERUSED THE RELEVA NT MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY CONSIDERED THE ORDER PASSED BY THE CO-ORDINATE BENCH IN ITA NO.2291/AHD/2015 FOR A.Y. 2011-12; THE RELEVANT PARAGRAPH WHEREOF IS AS FOLLOWS: 2. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE G RIEVANCES IN THE APPEAL ARE COVERED, IN FAVOUR OF THE ASSESSEE, BY A DECISION OF THE CO- ORDINATE BENCH IN THE CASE OF CO-OWNER I.E. SHRI S. M. PATEL VS. ACIT (ITA NO.3603/AHD/2015; ORDER DATED 08.01.2018) WHER EIN THE CO- ORDINATE BENCH, SPEAKING THROUGH ONE OF US (I.E. LE ARNED JUDICIAL MEMBER), HAS INTER ALIA OBSERVED AS FOLLOWS:- ITA NO. 1274/AHD/2017 SHRI RAJIV MANIBHAI PATEL VS. ACIT (INTL. TAX.) A.Y. 2011-12 - 5 - '2. RELEVANT FACTS ARE IN A VERY NARROW COMPASS. TH IS ASSESSEE JOINTLY SOLD THE CAPITAL ASSET IN QUESTION IN THE RELEVANT PREVIOUS YEAR ON 26.10.2010 FOR RS.6,60,00,000/-. HIS 1/3RD SHARE TH EREIN WAS OF RS.2,20,00,000/-. HE THEREAFTER INVESTED RS.1CRORE (SUPRA) IN NHAI BONDS TO CLAIM SECTION 54ECDEDUCTION. BOTH THE LOWE R AUTHORITIES DECLINED THE SAME ON THE GROUND THAT THE SAID STATU TORY PROVISION CAPS THE RE-INVESTMENT AMOUNT TO RS.50LACS ONLY. THEY TH EREFORE RESTRICT ASSESSEE'S CLAIM TO RS.50LACS TO DISALLOW THE REMAI NING EQUAL AMOUNT. WE FIND NO FORCE IN THIS APPROACH. HON'BLE MADRAS H IGH COURT'S JUDGMENT IN CIT VS. C. JAICHANDER (2015) 370 ITR 579 (MADRAS) HAS ADMITTEDLY UPHELD A CO-ORDINATE BENCH'S DECISION TH AT SUCH A DEDUCTION CLAIM OF RS.50 LACS EACH SPREAD OVER TO TWO FINANCI AL YEARS BUT FALLING WITHIN SIX MONTHS OF THE CAPITAL ASSET'S TRANSFER I N QUESTION IS VERY MUCH ALLOWABLE. WE FURTHER TAKE NOT OF THE FACT THAT THE LEGISLATURE HAS INSERTED SECOND PROVISO TO SECTION 54EC (1) INTRODU CING THE ABOVE CAP ON RE-INVESTMENT QUANTUM BY THE FINANCE (ACT NO.2), 2014 W.E.F. 01.04.2015 WHEREAS WE ARE DEALING WITH ASSESSMENT Y EAR 2011-12. THIS IS NOT THE REVENUE'S CASE THAT THE ABOVE AMENDMENT CARRIES ANY RETROSPECTIVE OPERATION. WE THEREFORE REJECT MR. KA BRA'S VEHEMENT CONTENTIONS SUPPORTING THE IMPUGNED DISALLOWANCE. T HE ASSESSEE'S SOLE SUBSTANTIVE GROUND IS ACCEPTED.' 6. APPLYING THE RATIO LAID DOWN IN THE ABOVE JUDGM ENT IT CAN BE CONCLUDED THAT WHEN THE CASE OF THE ASSESSEE WAS REOPENED ON 14.03.2014, THIS AMENDMENT WAS NOT IN EXISTENCE AND THEREFORE RESTRI CTIONS IMPOSED BY STATUE UNDER FIRST PROVISO OF SECTION 54EC OF THE ACT WILL NOT BE APPLICABLE HERE. THUS WE FIND SUBSTANCE IN THE ARGUMENT ADVANCED BY THE L D. AR. TAKING INTO CONSIDERATION THE ORDER PASSED BY THE LEARNED TRIBUNAL WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO EX EMPTION ON THE INVESTMENT MADE OF RS.50 LACS IN NHAL BOND ON 13.04.2011 FOR L ONG TERM CAPITAL GAIN ITA NO. 1274/AHD/2017 SHRI RAJIV MANIBHAI PATEL VS. ACIT (INTL. TAX.) A.Y. 2011-12 - 6 - SINCE THE SAME WAS INVESTED WITHIN 6 MONTHS FROM TH E TRANSFER OF THE CAPITAL ASSET. IN THAT VIEW OF THE MATTER RESPECTFULLY FOLL OWING THE DECISION PASSED BY THE CO-ORDINATE BENCH, WITH THE AFORESAID OBSERVATI ON WE DELETE THE ADDITION MADE BY THE AUTHORITIES BELOW. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 28/02/2019 SD/- SD/- (WASEEM AHMED) (MS. MA DHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 28/02/2019 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-13, AHMEDABAD. 5. , ! ', #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 18/02/2019 (DICTATION PAGES 5) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 19/02/2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 28/02/2019 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER